BY GREGORY DL MORRIS
BOOK REVIEW
The Day the Markets Roared By Henry Kaufman , with David B . Sicilia Matt Holt Books / BenBella Books , 2021
202 pages , with index , notes , charts , bibliography and b / w photos
Present-at-the-creation stories are usually exciting and insightful . This slim volume takes the concept a step further : it ’ s written by the creator . Henry Kaufman was with Salomon Brothers for 26 ( 1962 – 88 ) years as senior partner , managing director , member of the executive committee and head of the firm ’ s four research divisions . Notorious among Wall Street bulls as a relentless bear , he steadfastly stuck to hard facts and cautionary tones through the ’ 60s and ’ 70s , despite increasing pressure from the supply-side cheerleaders in the Reagan administration .
The titular event was August 17 , 1982 , when Kaufman saw meaningful traction against inflation and issued an optimistic memo to the firm ’ s brokers . Stocks soared to one of their largest post-war single-day gains ever to that date .
For the record , the gain on the S & P 500 was 38.81 points , or 4.8 %. This raises one of the few disappointments about his otherwise fascinating and engaging back-stage tour of Wall Street . The table on page 139 showing single-day US bull markets from 1945 – 2019 is presented too simplistically , with two columns in chronological order . The numerical column is not even centered on the decimal . It clearly should have been a “ stair ” chart with a bar for each year . Overall the graphics are muddy and look as if they were printed on a 1980s ditto machine .
To the story itself , there are several threads woven through the narrative , which gives a richness to the book despite just 170 pages of text . The main theme is the August 17 rally , but there are also consistent themes of fiscal and economic policy , as well as political and social history . Kaufman and his co-author , David Sicilia , have done a remarkable job of relating a great deal of information in a very economical space .
The book opens with the events of the day itself , then relates the press reaction and then spends the bulk of the text on the causes and context . Chapter titles are indicative : Intellectual Roots , Why I was Bearish for So Long , Albert M . Wojnilower aka “ Dr . Death ,” Critics Threats and Humor , Growing Pressures .
Whether or not it was intended as such , the chapter on growing pressures could be read as an ominous foreshadowing of today ’ s political and economic litmus tests .
Kaufman wrote , “ Even though I had never declared a political party affiliation , top members of the Reagan administration came to regard me as a devoted critic of their macroeconomic policies . They were joined by a few strongly conservative members of the business press who harshly criticized some of my forecasts . As pressure to conform to the emerging doctrine of supply-side economics grew , some editorialists wondered whether I had ‘ lost my touch .’ As the months of early 1982 ticked by , I began to feel as if my reputation was on the line .”
Another harbinger is how the criticism of Kaufman went septic . In early 1982 , Maxwell Newton of the New York Post , branded Kaufman one of a “ Gang of Six ambushing Reagan ,” all of whom were part of “ the whole left-liberal power structure in press , radio and television ,” and part of the “ under-cover socialists of America .”
Remaining unflappable , Kaufman wrote of that ad hominem attack , “ Such ravings were far outside of the mainstream of economic and financial commentary , arguably even on the pages of a newspaper owned by conservative publishing magnate Rupert Murdoch . Still , Newton seemed to enjoy his platform .”
To put that situation into historical context , the Rush Limbaugh radio show was not syndicated until 1988 , and Murdock did not start Fox News until 1996 , but as Kaufman documents , they had their precedents going back many years .
From beginning to end , however , Kaufman simply stuck to the facts . He started “ monitoring developments at the Federal Reserve Bank of New York in 1957 ,” he wrote . “ After I moved to Salomon Brothers in 1962 , I started following central banking closely , which made me one of a small number , probably no more than half a dozen , of early ‘ Fed watchers .’ According to business writer Martin Mayer , Billy Salomon believed I was the very first .”
Kaufman was also one of the first PhDs to work on Wall Street , and one of the first dedicated researchers . He got authorization and funding support from Salomon management to formalize credit research , and by 1981 led a team that created a creditflow model . He also began writing a report called Prospects for Financial Markets .
“ Before Prospects ,” Kaufman wrote , “ no one at the Fed or anywhere else had fully put flow-of-funds data to use as an analytical tool for projecting market prospects for the year ahead .”
For any reader , the first-person accounts at the highest levels of finance and government make for fascinating reading . For financial-sector insiders , there are even a few dishy stories about hirings , firings and dealmaking . Throughout the book , Kaufman maintains a gentle tone and even some self-deprecating humor — as highlighted by his reprint of a parody song about him to the tune of Gilbert & Sullivan ’ s “ Model of a Modern Major General .”
This book can be read in one sitting of a few enjoyable hours , but doubtless will be kept as a reference and source of perspective .
www . MoAF . org | Spring 2021 | FINANCIAL HISTORY 39